1

The overpaid bank tellers

SCB is one of the four largest banks in its region and has the reputation of being the most progressive. Mr. Dixit has been the President of the bank for 15 years. Before coming to SCB, Mr. Dixit worked for another large bank for 10 years. Mr. Dixit has implemented a number of changes that have earned him a great deal of respect and admiration from both bank employees and local people alike. For example, he took special care to recruit and place the representatives from local minorities in critical bank positions. He organized and staffed the citys only agricultural loan centre to meet the needs of the areas farmers. In addition, he established the states first uniline system for handling customers waiting in line for a teller.

Perhaps more than anything else, Mr. Dixit is known for establishing progressive human resource practices. He strongly believes that the banks employees are its most important asset and continually searches for ways to increase both employee satisfaction and productivity. He feels that all employees should strive to continually improve their skills and abilities and hence, he cross-trains employees and sends many of them to courses and conferences sponsored by banking groups.

With regard to employee compensation, Mr. Dixit firmly believes that employees should be paid according to their contribution to organizational success. Hence, 10 years ago, he implemented a results-based pay system under which employees could earn raises from 0-12% each year, depending on their job performance. Raises are typically determined by the banks HR Committee during February and are granted to employees on March 1 of each year. In addition to granting employees merit raises, six years ago the bank also began giving cost-of-living raises. Mr. Dixit had been opposed to this idea originally but saw no alternative to it.

One February, another bank in town conducted a wage survey to determine the average compensation of bank employees in the city. The management of SCB received a copy of wage survey and was surprised to learn that its 23 tellers, as a group, were being paid an average of INR 1100 per week more than were tellers at other banks. The survey also showed that employees holding other positions in the bank (e.g., branch managers, loan officers, and file clerks) were being paid wages similar to those paid by other banks (Exhibit 1).

After receiving the report, the HR Committee of the bank met to determine what should be done regarding the tellers raises. They knew that none of the tellers had been told how much their raises would be but that they were all expecting both merit and cost-of-living raises. They also realized that, if other employees learned that the tellers were being overpaid, friction within the organization could develop and morale might suffer. They knew that it was costing the bank over INR 1300000 extra to pay the tellers. Finally, they knew that as a group the banks tellers were highly competent, and they did not want to lose any of them.

2

Exhibit 1 Wage Survey Results: Comparative Salaries of Local Bank Officers (in INR)

Position Bank 1 Bank 2 Bank 3 SCB Commercial Loan Officer 2430000 2475000 2395000 2420000 Consumer Loan Officer 1960000 1735000 1788000 1950000 Mortgage Loan Officer 2355000 2295000 2475000 2360000 Branch Manager 1885000 1970000 1940000 1920000 Asstt. Branch Manager 1390000 1370000 1480000 1315000 New Accounts Officer 1195000 1190000 1185000 1190000 Officer Trainee 1160000 1150000 1170000 1165000

Average weekly earnings of local bank tellers Tellers 18600 18450 18750 19700 If you were in the banks HR Committee, how would you handle this issue of wage disparity?